The care provided by nursing homes and assisted living facilities is becoming increasingly important as people are now able to live longer. As our society’s life expectancy rises with each year that passes, so does the demand for services such as those provided in a nursing home or an assisted care facility.
However, the cost of such care is often too costly. Unfortunately this can make the services inaccessible to those with chronic illnesses or disabilities on fixed incomes who are not eligible for government assistance programs like Medicare and Medicaid.
Long-Term Care Insurance is not covered by your healthcare insurance
When we’re faced with long-term care costs, our options are limited. Medicare can only pay for so much and traditional insurance won’t cover it all either. With the expense of healthcare rising exponentially in recent years, a greater portion of Americans find themselves struggling to handle these high expenses as they age or have debilitating health conditions that prevent them from working full time – without some kind of financial help!
In order to qualify for government funded long-term care, you have to deplete nearly all of your assets before being eligible. You can use proactive planning to help protect your assets, which we are here to support you with. Long-term care insurance was created to address the gap in coverage.
What is Long-Term Care Insurance Designed to Cover?
First introduced as “nursing home insurance” in the 1980s, long-term care insurance is designed to cover expenses associated with long-term skilled nursing services delivered in a nursing home, assisted living facility, or other senior care setting, though some of today’s policies cover care delivered in your own home as well.
What are the benefits of long-term care insurance?
To ensure your quality-of-life in old age, it is important to plan for the future. Long-Term Care Insurance is designed to help you avoid paying out of pocket costs that can quickly eat up assets and savings.
This type of coverage provides a daily living allowance or cash benefit when medical conditions limit an individual’s ability to perform activities necessary for self sufficiency like dressing oneself, bathing themselves, using toilet facilities alone; transferring from one place to another without assistance; preparing food independently with some cooking aids if needed.
When you are no longer able to care for yourself, it’s important that someone is there to help. When one has become unable to take care of themselves after a serious illness or accident near the end of their life, it becomes crucial they have assistance in order not only survive but also thrive.
What does a Long-Term Care Insurance Policy Cover?
Long-term care insurance covers the cost of long-term care, when you can no longer do certain activities on your own. You might need assistance with feeding or bathing, getting in and out of bed and toileting or to have someone stay in your home for comfort.
These are known as activities of daily living (ADLs) and generally include:
- Ambulating (walking or getting around)
- Dressing and grooming
- Using the toilet
- Continence management
- Getting in and out of bed or a chair
Before your health insurance takes over, most policies require that you have been diagnosed with the inability to perform at least two of three ADLs. Most policies also have a deductible, or elimination period, which is a set number of days that must elapse between the time you become disabled (eligible for benefits) and the time your coverage kicks in.
Many policies offer a 90-day elimination period, but others can be longer, shorter, or even have no elimination period at all. Of course, the shorter the elimination period, the more expensive the premium.
Additionally, long-term care policies typically come with a predetermined benefit period, which is the number of years of care it will pay for. A benefit period of three to five years, for example, is a quite common duration for such policies. Most policies also come with a cap on the dollar amount of coverage that will be paid for care on a daily basis, known as a daily benefit amount.
Obviously, the younger and healthier you are when you buy the policy, the cheaper the premiums will be, so the sooner you invest in coverage, the better. In fact, most policies exclude certain pre-existing conditions, so if you wait until you become ill, it can be impossible to find coverage.
For example, if you have any of the following conditions, it generally disqualifies you from obtaining coverage:
- You already need help with ADLs
- You have AIDS or AIDS-Related Complex (ARC)
- You have Alzheimer’s Disease or any form of dementia or cognitive dysfunction
- You have a neurological disease, such as multiple sclerosis or Parkinson’s Disease
- You had a stroke within the past year to two years or have a history of strokes
- You have metastatic cancer
- You have kidney failure
Increasing Premiums, Decreasing Benefits
With the elderly population booming, there has been a surge in demand for long-term care services, which has led to a marked increase in the cost of such policies. At the same time, many insurers have been cutting back on the benefits their policies offer.
Given this, other types of hybrid policies are springing up. One increasingly popular type of hybrid policy combines long-term care insurance with life insurance. With this type of policy, if you don’t use the long-term care benefits, the policy pays a death benefit to your family when you pass away.
If you are looking to purchase long-term care insurance, you should speak with multiple insurance providers and compare their benefits, care options, and premiums. Different companies may offer the same coverage and benefits, but they can vary dramatically in price. Always ask about the insurance company’s history of rate increases, including the amount of the most recent increase.
For the best chances of success when shopping for a policy, get help from a fee-only planner, who is not compensated based on your choice of coverage. Or, if you are working with a commissioned agent, meet with a lawyer like us with experience in elder law, who can review the policy terms to ensure it’s a good fit for you before you sign on the dotted line.
When meeting with an insurance provider, you must get answers to following three questions about your policy:
- How long is the elimination period before the policy begins paying benefits?
- What capacities, or ADLs, must you lose before coverage kicks in?
- How many years of care are covered?
Buying long-term care insurance should be a family affair, because you are going to need your family members to advocate for you and file a claim for the policy when you need to use it. Given this, make sure your family knows what kind of policy you have, who your agent is, and how to make a claim.
What’s more, you should pre-authorize the right person to speak to the insurance company on your behalf, and not just rely on a power of attorney. That said, you should definitely have a well-drafted, updated, and regularly reviewed power of attorney on file as well.
Keep Your Policy Updated
Once you are in your 40s, your long-term care policy should be reviewed annually to evaluate new insurance products on the market and update your policy based on your changing needs. Whatever you do, once you have a policy in place, make sure you don’t miss a premium payment, because if you stop paying, even for a short period of time, you’ll lose all of the money you invested and will have no access to the benefits when you need them.
Conclusion paragraph: Long-term care insurance is not covered by your healthcare insurance. You will need to find a way to pay for long-term care, and the benefits of having this type of coverage are too great to ignore. The main types of long-term care coverages are designed to provide help with disability related costs as well as support paying for home health aides or nursing homes if necessary. To make sure you get the most out of your policy, it’s important that when you purchase a plan that you choose wisely and keep up with any changes in premiums or benefits so that you can maintain peace of mind knowing your needs have been met should they arise.
Reach out to us, as your Personal Family Lawyer®, for support in finding the right long-term care policy for your particular situation. Long-term care insurance, along with life insurance, are key components in your estate plan. When combined with the right estate planning vehicles, you can rest assured your family will be protected and provided for no matter what happens to you. Contact us today to learn more.
This article is a service of Brian Musell, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Peace of Mind Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Peace of Mind Planning Session and mention this article to find out how to get this $750 session at no charge.